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Zero-based budgeting (ZBB) has shared a similar fate to activity-based costing and rolling reforecasting in that it has been in and out of favor over the years—and, until now, its adoption has been hampered by the lack of easy-to-use financial planning software.

Myth 1: ZBB simply means building your budget from zero

While ZBB is most definitely not about extrapolating trends from the previous year, it is much more than budgeting from the bottom up. The aim is to build a culture of cost management so that managers can justify their budgets. This includes routinely reviewing the most cost-effective way to deliver activities and programs they are responsible for, keeping resources in step with workload, and eliminating any expense that is not aligned with the company’s overall strategy.

Myth 2: Implementing ZBB requires cutting ‘to the bone’

Most definitely not—ZBB only needs to reflect the amount of savings that business leaders have targeted. If you can afford it, you can take a more relaxed approach while still building a more cost-conscious culture.

Myth 3: ZBB will overwhelm your business and prevent it from doing anything else

While it takes time for any organization to adopt a new cost-management culture, it is far easier when it comes to systems. Using a solution such as Anaplan, which can be rapidly deployed and easily managed, means organizations can have the granular insight into costs in a matter of weeks instead of months.

About the Author

An expert in the field of financial software, Richard Barrett spent half his career seeking out and working alongside entrepreneurs to maximize their companies’ values and the other half in commercial roles in the multinationals that subsequently acquired them. His experience spans both large and small companies in sportswear, express parcels, insurance and, in the last two decades, financial software. He first became involved in cost management and driver based planning in the late ‘80s, has taught and written on them for the UK’s Chartered Institute of Management Accounting and ended his career marketing them at ALG Software, BusinessObjects and SAP.
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